- Gold price remains confined in a range just above a two-month low touched on Wednesday.
- Delayed Fed rate cut bets underpin the USD and act as a headwind for the non-yielding metal.
- Geopolitical tensions in the Middle East help to limit the downside for the safe-haven XAU/USD.
Gold price (XAU/USD) hangs near a two-month low touched the previous day and struggles below the $2,000 psychological mark through the early European session on Thursday. A stronger US inflation report released on Tuesday fueled speculations that the Federal Reserve (Fed) will wait until its June policy meeting before cutting interest rates. This acts as a tailwind for the US Dollar (USD) and turns out to be a key factor capping the non-yielding yellow metal.
That said, a further pullback in the US Treasury bond yields is holding back the USD bulls from placing aggressive bets. Apart from this, the risk of a further escalation of geopolitical tensions in the Middle East contributes to limiting the downside for the safe-haven Gold price. Nevertheless, growing acceptance that the Fed will keep interest rates higher for longer and the lack of any meaningful buying suggests that the path of least resistance for the XAU/USD is to the downside.
Daily Digest Market Movers: Gold price remains confined in a narrow range amid mixed fundamental cues
- The stronger US consumer inflation figures prompted investors to lower bets for early rate cuts by the Federal Reserve and underpin the US Dollar, capping the upside for the non-yielding Gold price.
- Fed funds futures have priced out a rate cut in March and see a nearly 80% chance of easing at the June meeting, and about three 25 basis points rate cuts by the end of this year as against five two weeks ago.
- The US Treasury bond yields retreat further on the back of overnight comments by Chicago Fed President Austan Goolsbee, saying that the central bank should be wary of waiting too long before it cuts rates.
- Goolsbee indicated that the Fed’s trajectory back towards achieving its 2% inflation target would still be on track even if price increases in the US run a bit hotter-than-expected over the next few months.
- This keeps a lid on the Greenback, which, along with the risk of a further escalation of geopolitical tensions in the Middle East, lends some support to the safe-haven XAU/USD and helps limit the downside.
- The Israeli military said on Wednesday its fighter jets began a series of strikes in Lebanon in retaliation to a rocket fired into Northern Israel, raising the risk of a war between the two countries.
- Meanwhile, negotiations for a ceasefire between Israel and Hamas in Gaza have resumed as the former faces international pressure to stop its bombardment of the southern Gaza city of Rafah.
- The US Retail Sales figures for January are due for release later during the North American session, with consensus estimates pointing to a 0.1% fall as compared to a flat reading last month.
- Thursday’s US economic docket also features the Empire State Manufacturing Index, the Philly Fed Manufacturing Index, the usual Weekly Initial Jobless Claims and Industrial Production data.
Technical Analysis: Gold price manages to defend 100-day SMA support, not out of the woods yet
From a technical perspective, bearish traders need to wait for acceptance below the 100-day Simple Moving Average (SMA) before positioning for any further losses. Given that oscillators on the daily chart are holding deep in the negative territory, the Gold price might then accelerate the fall towards the very important 200-day SMA support, currently pegged near the $1,965 area. A convincing break below the latter should pave the way for a further depreciating move towards an intermediate support near the $1,952-1,950 zone en route to the November 2023 low, around the $1,932-1,931 region.
On the flip side, any attempted recovery beyond the $2,000 mark now seems to confront stiff resistance near the $2,011-2,012 area. That said, some follow-through buying, leading to a subsequent strength beyond the $2,015 level, might trigger a short-covering rally and lift the Gold price to the 50-day SMA, currently around the $2,030 region. The latter should act as a key pivotal point, which if cleared decisively will set the stage for additional gains beyond the $2,044-2,045 intermediate hurdle, towards the $2,065 supply zone.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.06% | 0.03% | 0.04% | 0.20% | -0.19% | 0.10% | 0.02% | |
| EUR | -0.06% | -0.04% | -0.02% | 0.15% | -0.24% | 0.06% | -0.02% | |
| GBP | -0.02% | 0.02% | -0.01% | 0.17% | -0.23% | 0.07% | 0.00% | |
| CAD | -0.04% | 0.02% | 0.00% | 0.17% | -0.22% | 0.07% | 0.00% | |
| AUD | -0.18% | -0.17% | -0.16% | -0.16% | -0.40% | -0.09% | -0.16% | |
| JPY | 0.19% | 0.24% | 0.21% | 0.22% | 0.38% | 0.30% | 0.23% | |
| NZD | -0.12% | -0.06% | -0.08% | -0.08% | 0.07% | -0.31% | -0.08% | |
| CHF | -0.03% | 0.02% | 0.00% | 0.01% | 0.18% | -0.22% | 0.08% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
US Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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